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Car Loan

Car Loan

USED CAR LOAN

A used car loan is a kind of auto loan created especially to assist people in buying a previously owned or used car. Similar to a new car loan, an Equated Monthly Installment (EMI) loan for used cars enables the buyer to finance the purchase of a vehicle and return the amount over a certain period of time. Because the loan is secured by the car, the lender has the right to take the car back if the borrower doesn’t make payments as agreed.

 

Features & Benefits:

  1. Flexible Repayments: Flexible and convenient repayment tenure of up to 48 months.
  2. Coverage: Typically, lenders offer financing for 70% to 90% of the car’s market value, depending on factors such as the car’s age, model, and condition.
  3. Minimal Documentation: Lenders typically require minimal documentation, including identity proof, address proof, income proof, and car details, making the application process straightforward. With minimal documentation required, you can get the loan quickly and easily.
  4. Quick Approvals & Disbursals: Explore the ease of quick approvals for financing your used car.
  5. Eligibility Criteria: Most lenders have an age limit for the used car being financed, often restricting loans to cars that are not older than 7-10 years by the end of the loan tenure.
  6. Insurance Requirement: Borrowers are typically required to have comprehensive insurance coverage on the car for the duration of the loan.
  7. No Need to Liquidate Savings: With a loan, buyers can purchase a car without using up their savings, allowing them to maintain liquidity for other needs.

 

Lenders in India usually need a number of documents when an application applies for a used automobile loan in order to determine the applicant’s eligibility and to proceed with the loan processing.

A list of typical paperwork required for a used car loan is provided below.:

 

  1. Identity Proof

   – Aadhaar Card

   – PAN Card

   – Passport

   – Voter ID Card

   – Driving License

  1. Address Proof

   – Aadhaar Card

   – Passport

   – Voter ID Card

   – Driving License

   – Utility Bills (Electricity, Water, Gas)

   – Rent Agreement

   – Property Tax Receipt

 

  1. Income Proof

   – For Salaried Individuals:

     – Latest Salary Slips (Last 3 months)

     – Form 16 or Income Tax Return (ITR) of the last 2 years

     – Bank Statements of Salary Account (Last 6 months)

   – For Self-Employed Individuals:

     – Income Tax Returns (ITR) of the last 2-3 years

     – Audited Balance Sheet and Profit & Loss Account (Last 2-3 years)

     – Bank Statements of Business Account (Last 6-12 months)

  1. Age Proof

   – Birth Certificate

   – PAN Card

   – Passport

   – School Leaving Certificate

  1. Employment Proof

   – For Salaried Individuals:

     – Employment Offer Letter or Appointment Letter

     – Employee ID Card

     – Experience Letter from Previous Employers (if applicable)

   – For Self-Employed Individuals:

     – Business Registration Certificate

     – GST Registration Certificate

     – Proof of Business Continuity (Trade License, Sales Tax Certificate, etc.)

  1. Photographs

   – Recent passport-sized photographs (typically 2-4 copies)

  1. Car-Related Documents

   – Seller’s Details: ID proof and address proof of the seller (if the car is being purchased from an individual).

   – Car Registration Certificate (RC): Original RC of the used car.

   – Car Insurance: A copy of the current car insurance policy.

   – Pollution Under Control (PUC) Certificate: Valid PUC certificate.

   – Car Valuation Report: Valuation report from an authorized car appraiser (sometimes arranged by the lender).

   – Invoice of the Car: If the car is purchased from a dealership.

  1. Loan Application Form

   – Duly filled and signed loan application form provided by the lender.

  1. Existing Loan Documents (if applicable)

   – If the borrower has any existing loans, the lender might request the loan account statements to assess the debt-to-income ratio and repayment capacity.

  1. Signature Verification Proof

   – Cheque with your signature for verification

   – Bank account passbook or statement with your signature

 

Actions to Take When Purchasing a Used Car:

Evaluate the vehicle closely: If you are unsure or lack the essential knowledge, a secondhand car should be thoroughly inspected by a mechanic. Feel free to haggle over the dealer’s listed pricing if there are any issues. Take the car somewhere with less traffic to see whether it vibrates.

Make sure that the paperwork is accurate: Examine the used car’s insurance and registration documents closely. The engine and chassis numbers listed on the documents should match those on the vehicle. Examine the automobile carefully to see if it has ever been in any accidents.

Verify the car’s history: A used car has some history, but a new car is brand new and comes straight out of the showroom. Therefore, research all of its facts online to see if company has experienced any accidents or was providing poor service.

Ensure that the registration certificate (RC):  is transferred to your name after you purchase a secondhand vehicle. Furthermore, you will need a NOC, or No Objection Certificate, if the vehicle was registered in a separate state. You will also require a NOC if the vehicle’s prior owner obtained financing for the acquisition.

Transfer the insurance: Your name must be added to the vehicle insurance as soon as possible after the purchase. Even if you have the RC moved to your name, keep in mind that the insurance policy will be worthless if it is still in the name of the prior owner.

Get a service done: In order to ensure that nothing is broken before you use the used car, have it serviced. For instance, the automobile will have a complete cleaning, its fluids will be changed, and any dents or rust will be addressed during the servicing.

 

 

 

Factors that Impact Used Car Loan Interest Rate

Your credit score: Before approving the loan request, your credit worthiness is assessed. It is based on a number of factors such as both your current and closed credit accounts, the duration for which you used credit, and the history of payments you made. The better your credit score, the lower will be the interest charged.

Loan amount and down payment: The higher the loan amount, the higher is the interest rate charged. In other words, if you make a large down payment, you are considered more worthy as a borrower, and hence, the interest rate maybe low.

Loan tenure: Longer loan terms result in lower interest rates. If the tenure is brief, a high rate is assessed. So, if you have a long tenure, your EMIs will be lower.

Debt to income ratio: This ratio helps us understand what amount of money you might owe to different lenders with respect to your total income. So, if the ratio is low, you might be charged a lower interest.

The car’s age: In the sad instance of a default, we must take into account the age of the car as it has an impact on its market value. An older car will have a higher interest rate due to its decreased market value.

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